Consumer Watchdog criticized the recent amendments to California Insurance Commissioner Ricardo Lara’s proposed regulations, stating that they still do not address coverage issues for policyholders who have been non-renewed.
The amendments, which allow insurance companies to use climate model algorithms to justify rate increases, do not require transparency or accountability, according to the organization.
The revised draft does not close loopholes that permit insurers to claim they will increase coverage in fire-prone areas by only 5%, far below the 85% coverage repeatedly promised by Commissioner Lara. The regulations also allow insurers to adjust coverage standards if they cannot meet the proposed requirements.
Consumer Watchdog further expressed concern that the amendments ignored public input on the lack of transparency in the "PRID" model process. The group highlighted the absence of minimum disclosure standards or technical guidelines for the models and algorithms that could impact insurance rates.
The new rules, they argue, create additional barriers to public participation in the process.
Carmen Balber, executive director of Consumer Watchdog, said that Lara missed an opportunity to enforce commitments from insurance companies, penalize non-compliance, and mandate transparency for the models being used to justify rate hikes.
“Today's amendments just continue the lie,” she said. “This regulation still doesn't get people insured or make the secret algorithms insurance companies will be allowed to use to raise rates publicly accountable.”
Consumer Watchdog and other advocacy groups raised similar concerns during a California Department of Insurance public hearing last month, which they reiterated in comments submitted on Sept. 17. These concerns included provisions that allow insurers to avoid returning to areas they have abandoned and other regulatory loopholes.
According to Consumer Watchdog, the new regulations will allow insurers to offer minimal coverage similar to the FAIR Plan while rate increases will take effect immediately. Insurers will not have to report their progress toward meeting coverage commitments until 2027, and there are no penalties for failing to meet these commitments. Insurers can also delay compliance indefinitely by claiming "reasonable effort."
The organization also criticized the regulation’s approach to public review of the models insurers will use to determine rate increases. The rules allow insurers to keep their models private, sidestepping Proposition 103’s public disclosure requirements, Consumer Watchdog said.
The regulations do not mandate that wildfire models be proven reliable or unbiased and offer no standard guidelines for the information that must be made public.
Additionally, the process for public participation and expert review is voluntary, and models currently in use are exempt from review for up to four years.
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